In an effort to spiff up my now 2-year-old iPhone 4 so that at least it felt slimmer and newer to me, I wanted to switch to a thin and minimalist case. The official Apple-branded black bumper case at an Apple store looked nice but was priced at a shocking $29. So I jumped onto eBay and found what appeared to be the exact same case for 99 cents. Free shipping. No sales tax. Credit cards accepted via PayPal.
Just 99 cents? How was this possible? Here’s a cost breakdown:
- eBay insertion fee. The price for listing an item at a fixed price is $0.50 cents. However, this is only per-listing. Over 1,000 of these cases are selling per listing, so the per-item insertion fee ends up being less than a cent.
- eBay final value fee. There is also a per-sold-item fee of 11% for items in this category, so that’s 11 cents.
- PayPal credit card fees. The seller accepted only PayPal, which meant instant payment and that I could pay with any credit card. The standard fee for selling within the US is 2.9% plus $0.30 per transaction. That’s 33 cents. PayPal does offer volume discounts, but even with $10k in monthly volume it’s only a penny cheaper at 2.2% plus $0.30 per transaction.
- Shipping. The item is being shipped from China using something called “ePacket”. After some research, this is a joint effort between China Post and the US Postal Service to ship bulk amounts of small packages cheaply from China to the US based on total weight of all packages. It actually ends up costing less than USPS Domestic First Class which for a small 1 oz. padded envelope would cost 65 cents. The drawback is it takes a long time – the seller only promises less than 30 business day delivery (which explains the mediocre feedback rating).
Many US-based eBay sellers are fuming over the fact that it costs less to ship from China than within the US, as there is domestically there is no slower, cheaper option than First Class. It’s hard to pin down the cost here, but some ePacket sellers break out the shipping separately at 29 cents. That’s less than a USPS postcard stamp.
- Licensing fees. Yeah, right. The packaging of the case has the same shape, but doesn’t say Apple or have the fruit logo anywhere on it.
- Production costs. How much did it cost to manufacture this case? There’s labor, tooling, machinery, and whatever TPU/silicone/plastic costs.
- Mailing supplies. The case was mailed in a proper bubble-wrap envelope with laser-printed postage label and clear shipping tape. All these things cost money, and it was obviously packed by hand and not automated machine.
- Human Labor. Somebody had to spend the time to list it, print out the labels for each customer, pack everything, and deliver it to the post office.
Assuming my shipping estimate is correct, that’s 11 cents to eBay + 33 cents to PayPal + 29 cents to shipping = 73 cents, leaving only 27 cents for mailing supplies, labor compensation, and oh yeah… making the actual bumper case!
Slow shipping wasn’t a big deal for me, so I ordered one. 99 cents and 3 weeks later, I got my case. In comparing with the real OEM case in the Apple store, I couldn’t tell any difference. (Heck, they may have been made in the same factory.) I can’t believe it cost 99 cents and so many people made what I assume is an acceptable profit – the manufacturer, China Post, USPS, the seller, PayPal, and eBay. If I was a better writer, I’d end this post with something profound about how this 99 cent case captures our current worldwide manufacturing environment in a nutshell.
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The company selling the iphone cases probably use micropayments on eBay, as per their site “If your transactions typically average less than $10, you could save money with our “5% plus 5¢” rate. Here’s an example for a business that usually accepts $2 payments.” So instead of 32.9 cents, its 10 cents.
ha! I always wonder how they make money… Love the breakdown, jonathan!
I have been buying stuff like this for years off ebay. Anything small and light. Batteries of all kinds, cables, usb drives, memory cards, etc. The shipping from China usually ends up being about a week or so. If I want to avoid the shipping from China, I can often find a U.S. seller (shipping via first class envelope) with the same item for about $0.25 more.
That’s ironic that you chose to pay $300 for iphone marketing and not $20 for the marketing of the case. Sure we tend to think Apple spend billions on R&D. Well the reality is that it’s a fraction (probably less than a third) in comparison to what they spend on marketing. Enjoy the Apple maps!
I’ve heard some sellers do this as a loss leader in order to build up good reputation.
@Greg: that makes sense. I’ve noticed quite a few of the volume Chinese sellers on Ebay push mass quantities of low cost items. Since these are simple transactions that rarely have problems it tends to drive their feedback rating way up, so even if they scam people on other products their rating is above 98 or 99 percent. If they aren’t losing much overall, basically it’s cheap advertising.
Also a good reminder of why you want to read those negative reviews on every bulk seller regardless of rank before you place a bid/purchase.
I refuse to buy from overseas sellers unless I absolutely have no choice. Even with extensive research I still have problems with my tech purchases from China and Hong Kong about half of the time. Since return shipping with delivery confirmation and insurance (required to ensure you actually get a refund and so ebay will back you) usually costs a lot – it’s often no worth returning either, so you just have to take a loss.
More likely your post illustrates Chinese total lack of respect for American intellectual property and the U.S. government’s (via the post office) unwitting subsidy of Chinese manufacturing to the detriment of domestic companies. I’m not judging, just pointing out some of the implications of this kind of product.
Hey Jonathan, have you switched your iPhone 4 from AT&T to StraightTalk.com? It’s working great for me. I used the Fatwallet.com link for 12.5% cashback on the micro sim+30 day plan package and the discount has posted to my account. At checkout I used code SIMSAVE which made the micro sim free ($9.99) and RMNST for free shipping. Total cost under $40!
Very nice article Jonathan.
Is there any similar case/screen protector in ebay you recommend for iphone5?
Just wanted to add that ebay has premium seller programs that heavily lower your cost to post items and lower the final value fee a bit. They are a flat fee every month.
Its interesting looking at these numbers and then listening to Obama and Romney thinking they can realistically bring jobs from China back to the US. I’ve heard people state they would pay $50 more for the iphone or a TV to be made in America but that number is ridiculous. To cite some personal examples;
My company required a large piece of molded plastic to cover some high tech equipment. We had it made locally for about $17 a unit, which was ok as the cost of equipment was many thousands. However when the economy started to suffer and we needed to increase margins by cutting costs so we looked to China to make the same thing. The outcome…… 57c per unit including shipping to our door!
A small product we made in our on site factory was costing us about $100 a unit to manufacture. This got out sourced completely to China for $7 a unit, including shipping.
Finally, I wear boxer briefs made by Jockey in which i pay about $7 a pair for. A few years back I was outside the factory in China where they are made and they had a stall selling them. 10 pairs for $1, I assumed they were rejects but I compared them with my US bought pair and they were identical.
This is almost straight out of one of the books you have reviewed – CHEAP – it’s a race towards lowest prices and not towards higher value for money.
If they make these things by the 1000’s then it probably costs pennies to make them.
Andy, its a simple rubber bumper. I doubt Apple patented it or has any copyright that would really apply. Apple didn’t invent this idea. Its easy to make a similar bumper without breaking patents or copyrights. I agree that there is a lot of pirating and copyright/patent infringement by foreign importers but I doubt this is such a case.
I tried a similar cheap bumper for my iPhone. My original Apple bumper (free due to antenna issues) lasted about 16 months. The cheaper bumper felt the same but lasted less than two months. The rubber started separating from the plastic. YMMV. The cost of several cheap ones would still seem to be a better deal. Nice breakdown!
So if the product only cost 27 cents for mailing supplies, labor compensation, and oh yeah… making the actual bumper case! Isn’t it funny that apple couldnt just include it with their $400 phone ?
Lets not forget that the people in China are worse off in terms of wages…how else would you get 1/10x of the US prices or less?
i think we are worse off then them or at lease we will be very soon at the rate we are digressing
Chris, about 900 million people in China live on less than $2 a day, less than 2% of Chinese own cars and their nation is a totalitarian dictatorship that doesn’t allow freedom of speech or religion. I could go on but you get the point. We are clearly not doing worse than they are.
Buy it with a credit card you’re not using regularly and it could be free! (Chase and Capital One cancel monthly balances <$1)
now that’s what i’m talking about! right on Adam!
I had the Apple bumper case for my iPhone 4, which Apple provided free– remember the iphone antenna issue? Apple gave away a bunch of free cases because of it.
Anyway, I loved the design, except it didn’t last forever– falling apart after a year, and I ended up replacing my case twice since then, once with a soft silicone replacement, and then eventually a hard shell replacement. I’m not a fan of cases that provide buik, but I have to admit, the hard shell has held up well.
Everyone is getting rich except for the person who is taking all the risk and effort to sell these things. Capitalism at its finest!
I purchased an Mini-SD to SD Adapter Card off of Amazon for $0.99 including shipping (not prime). I was shocked, I can only imagine it is overstock. Was shipped from the US using First Class Mail.
Jonathan: Want to make your phone *even thinner*? Don’t use a case at all. They’re made out of gorilla glass for crying out loud. And screen protectors? They look horrible and reduce the touch sensitivity of the screen.
I’m on my second iPhone in almost four years and have never used a case or protector. They both look like new. I suppose I am more careful with my stuff than some.
Very interesting post though 🙂
@Brian – I agree with you about the screen protectors, modern oleophobic glass is awesome and gorilla glass is good at avoiding smudges and scratches from everyday use. I’ve seen a cracked iPhone back glass after being dropped on the corners, however, so I’m happy with the limited protection of the bumper.
http://mashable.com/2010/10/13/iphone-4-glass/